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Service tax and excise duty relief leaves hospitality industry disillusioned
March, 02nd 2009

The recent notification of the Central Government to reduce service tax and excise duty by two per cent is not expected to come to the rescue of the hospitality industry in the current time of despair. The Government directive will only be applicable to the hotel rooms and the banquet and convention facilities.

Speaking about the same, Rajindera Kumar, Vice President, Federation of Hotels and Restaurants Association of India (FHRAI) stated, The relief given by the Government will provide negligible or no benefit to the industry and has left the industry sad and disillusioned. If the Government wanted to come to the aid of the industry while it is facing a slowdown, it should have looked into the quantum and the actuals of luxury tax as also the quantum of value added taxes could be reduced to 10. The service tax benefit is only reduced to the banqueting area, which is not a major part of the hotel operations. There are several hotels which do not even provide the facilities.

With the slowdown that the industry is facing, the low occupancies and lesser movement in the Food and Beverage segment, the industry was expecting to receive tax relief from the Government in the Interim Budget. However, the current stimulus package of the Government is not expected to stimulate the industry. At the face of it, it is a welcome step. However, we were expecting some concessions on import duties. Service tax benefit will not help the restaurant industry at all, stated Sandeep Goyle, Honorary Secretary, National Restaurant Association of India (NRAI). Even the excise duty relief by two per cent is negligible opined S P Jain, President, Hotel and Restaurant Association of India (Western India). However, the benefits, as received by the industry from the directive will be passed on to the customers, Jain added.

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